Ampco-Pittsburgh Corp (AP) 2018 Q4 法說會逐字稿

Good morning, and welcome to the Ampco-Pittsburgh Corporation Fourth Quarter 2018 Earnings Results Conference Call. (Operator Instructions) Please note, this event is being recorded.

早安，歡迎參加 Ampco-Pittsburgh Corporation 2018 年第四季盈餘結果電話會議。(接線員指示) 請注意，本活動將被錄音。

I would now like to turn the conference over to Melanie Sprowson, Director of Investor Relations. Please go ahead.

現在我想把會議交給投資人關係總監 Melanie Sprowson。請開始。

Thank you, Chad, and good morning to everyone joining us on today's fourth quarter conference call. I'm joined today by Brett McBrayer, our Chief Executive Officer; and Mike McAuley, Senior Vice President, Chief Financial Officer and Treasurer.

謝謝你，Chad，也向今天加入我們第四季電話會議的各位道早安。今天與我一同出席的有我們的執行長 Brett McBrayer，以及資深副總裁、財務長兼司庫 Mike McAuley。

Before we begin, I would like to remind everyone that participants on this call may make statements or comments that are forward-looking and may include financial projections or other statements of the corporation's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties, many of which are outside of the corporation's control. The corporation's actual results may differ significantly from those projected or suggested in any forward-looking statement due to a variety of factors, including those in the corporation's most recently filed Form 10-K and subsequent filings with the Securities and Exchange Commission. We do not undertake any obligation to update or otherwise release publicly any revision to our forward-looking statements.

在開始之前，我想提醒各位，本次電話會議中的與會者可能會發表或評論前瞻性陳述，並可能包含財務預測或其他關於本公司計畫、目標、預期或意圖的陳述。這些事項涉及若干風險與不確定性，其中許多超出本公司控制範圍。由於多種因素，本公司實際結果可能與任何前瞻性陳述中所預測或暗示者有重大差異，包括本公司最近提交的 Form 10-K 以及其後向美國證券交易委員會提交的文件中所述因素。我們不承擔更新或以其他方式公開發布對前瞻性陳述之任何修訂的義務。

A replay of this call will be posted on our website later today and remain available for 2 weeks following the conclusion of the call. To access the earnings release or the webcast replay, please consult the Investors section of our website at ampcopgh.com.

本次電話會議的重播將於今日稍晚張貼於我們的網站，並在會議結束後 2 週內提供收聽。如需取得盈餘新聞稿或網路直播重播，請至 ampcopgh.com 網站的 Investors（投資人）專區查詢。

With that, I'll turn the call over to Brett McBrayer, Ampco-Pittsburgh's CEO. Brett?

接下來，我把電話交給 Ampco-Pittsburgh 的執行長 Brett McBrayer。Brett？

Good morning, and welcome to our call. I want to start with updating our investors on actions we are taking to restructure the corporation and returning to profitability.

早安，歡迎參加我們的電話會議。我想先向投資人更新我們正在採取的行動，以重整公司並恢復獲利。

First, in October of 2018, the Board of Directors of the corporation approved a plan to sell our Canadian subsidiary, ASW Steel Inc. Loss of significant U.S. business, due to a combination of tariffs imposed by the United States on imports of primary steel products and the loss of a key customer due to a plant closure have resulted in significant losses in 2018. ASW has been accounted for as a discontinued operation in our Q4 and 2018 full year financial statements, and we've recorded a related $15 million impairment charge to write the business down to its currently estimated fair value.

首先，於 2018 年 10 月，本公司董事會核准一項計畫，出售我們的加拿大子公司 ASW Steel Inc.。由於美國對主要鋼鐵產品進口課徵關稅，以及因一座工廠關閉而失去一位關鍵客戶，導致我們在 2018 年失去大量美國業務，並造成重大虧損。在我們第四季及 2018 全年財務報表中，ASW 已按停業單位列示，且我們已認列相關 1,500 萬美元減損費用，將該業務帳面價值調降至目前估計的公允價值。

Moving forward, we will continue to participate in the forged engineered products market, yet without the risk of a back-integrated asset ownership position.

展望未來，我們將持續參與鍛造工程產品市場，但不再承擔擁有向上游整合資產所帶來的風險。

Second, we are pursuing additional footprint-reduction actions. We will announce these forthcoming changes to our business as the actions move closer to completion. Our objective is to rightsize our capacity and simplify our operating structure.

第二，我們正在推動進一步的據點縮減行動。隨著相關行動接近完成，我們將宣布這些即將到來的業務變更。我們的目標是使產能規模更符合需求，並簡化營運架構。

Third, we have embarked on multiple cost-reduction initiatives. In December, we offered an early retirement incentive to the employees of our U.S. operations. And in February of this year, we completed phase 1 of our overhead reduction plan. This phase 1 action is expected to deliver roughly $2.5 million per year in pretax savings. Our next steps in the consolidation of our assets are expected to facilitate further overhead reductions of our businesses.

第三，我們已展開多項成本降低計畫。在 12 月，我們向美國營運據點的員工提供提前退休獎勵方案。而在今年 2 月，我們完成了管理費用削減計畫的第一階段。預期第一階段每年可帶來約 250 萬美元的稅前節省。我們在資產整併方面的下一步，預期將促成業務進一步降低管理費用。

And finally, we are aggressively simplifying our manufacturing flow path. This simplification will deliver a step change in operational performance and free up working capital investment. The immediate need for change has been embraced by our employees, their skills and talents are our greatest asset. Their dedication to our success has really been incredible. We are moving forward with the speed and sense of urgency and with high expectations for our future.

最後，我們正積極簡化製造流程路徑。這項簡化將帶來營運績效的躍升，並釋放營運資金投入。員工已擁抱這項迫切的變革需求，他們的技能與才能是我們最重要的資產。他們對我們成功的投入確實令人難以置信。我們正以速度與緊迫感向前推進，並對未來抱持高度期望。

In 2018, we began to lay the foundation for the future of Ampco-Pittsburgh. 2019 is about execution.

在 2018 年，我們開始為 Ampco-Pittsburgh 的未來奠定基礎。2019 年將著重於執行。

Now a review of 2018. Despite an approximate 9% increase in total revenue from continuing operations, 2018 was a challenging year for the corporation. Our Forged and Cast Engineered Products segment generated record sales to the oil and gas industry, but experienced a significant contraction in the second half of the year due to inventory corrections in the frac block supply chain.

現在回顧 2018 年。儘管持續營運的總營收約成長 9%，2018 年對公司而言仍是充滿挑戰的一年。我們的鍛造與鑄造工程產品事業部對油氣產業創下銷售新高，但由於壓裂閥塊（frac block）供應鏈的庫存修正，下半年出現顯著萎縮。

In addition, results from continuing operations in 2018 reflected several negative factors that impacted the segment, including higher cost of raw materials and other key production materials, certain equipment reliability issues, resulting in shipment delays and high maintenance costs and idle capacity at one of our cast roll plants.

此外，2018 年持續營運的結果也反映出數項對該事業部造成影響的不利因素，包括原物料及其他關鍵生產材料成本上升、部分設備可靠度問題導致出貨延遲與維修成本偏高，以及我們其中一座鑄輥工廠的閒置產能。

The Air and Liquid Processing segment performed well in 2018, increasing its revenue by approximately 2.3%. We recorded a significant asbestos charge for this segment, representing the estimated cost for pending and future asbestos litigation, net of additional insurance recoveries through the anticipated date by which the corporation expects to have resolved all asbestos-related claims.

空氣與液體處理事業部在 2018 年表現良好，營收約增加 2.3%。我們就該事業部認列一筆重大石綿費用，代表對未決及未來石綿訴訟的估計成本，並扣除在公司預期解決所有石綿相關索賠之日期前可望取得的額外保險理賠。

The Asbestos Charge captures our estimated total future exposure. Other than the Asbestos Charge, this segment generated solid operating income performance.

石綿費用反映我們估計的未來總曝險。除石綿費用外，該事業部的營業利益表現穩健。

From a liquidity standpoint, net cash flows from operating activities of continuing operations reversed its negative trend in 2018.

就流動性而言，持續營運之營業活動淨現金流在 2018 年扭轉了先前的負向趨勢。

We also executed 2 key actions in 2018, including the divestiture of our Vertical Seal service business in the fourth quarter and the closing of a sale and leaseback transaction relating to the select portion of our real estate properties.

我們也在 2018 年執行了兩項關鍵行動，包括於第四季處分我們的 Vertical Seal 服務業務，以及完成一項與我們部分不動產相關的售後租回交易。

These actions strengthened our liquidity and positioned us well to successfully pay off the promissory notes, which we did earlier this month.

這些行動強化了我們的流動性，並使我們具備良好條件得以順利償還本票，我們也已於本月稍早完成償付。

The asset sale also marked the beginning of the process of realigning our manufacturing footprint, which, as I described, is a key element of our turnaround plan.

該資產出售也標誌著我們重新調整製造據點版圖流程的開始；如我所述，這是我們轉型計畫的關鍵要素。

In addition to our restructuring activities, we have worked to mitigate equipment reliability issues, which adversely affected performance in the second half of 2018.

除重整活動外，我們也致力於緩解設備可靠度問題；該問題在 2018 年下半年對績效造成不利影響。

With these significant items behind us, the integration of new leadership, the progression to a lean-based production system and further restructuring initiatives currently in process, we are forming the foundation for future sustainable profitability for Ampco-Pittsburgh.

在這些重大事項告一段落後，隨著新領導團隊的整合、精實導向生產系統的推進，以及目前進行中的進一步重整措施，我們正為 Ampco-Pittsburgh 未來可持續的獲利能力奠定基礎。

The global short-range outlook published by the World Steel Association in October of last year indicates the demand for steel in 2019 is expected to remain positive. Our order backlog for 2019 supports this outlook.

世界鋼鐵協會於去年 10 月發布的全球短期展望指出，2019 年鋼鐵需求預期仍將保持正向。我們 2019 年的訂單積壓量支持此一展望。

Our markets remain challenging, however, and worldwide steel demand could face an uncertain future in the current global economic environment due to growing trade tensions and unstable currency movements. Therefore, our plan is to prepare Ampco-Pittsburgh for sustainable future profitability in both higher and lower-demand environments.

然而，我們的市場仍具挑戰性；在目前全球經濟環境下，由於貿易緊張升溫與匯率波動不穩，全球鋼鐵需求的未來可能面臨不確定性。因此，我們的計畫是在高需求與低需求環境下，都能讓 Ampco-Pittsburgh 為未來可持續獲利做好準備。

I will now turn the call over to our CFO, Mike McAuley, to review our financial results for the quarter. Mike?

接下來我把電話交給我們的財務長 Mike McAuley，請他回顧本季的財務結果。Mike？

Thank you, Brett, and good morning, everyone. I want to start today by reiterating a few points Brett described which had a significant impact on our financial statements for Q4 and total year 2018.

謝謝你，Brett，也向各位道早安。我今天想先重申 Brett 所描述的幾點，這些事項對我們第四季及 2018 全年財務報表造成了重大影響。

First, pursuant to a plan approved in October 2018 by the corporation's Board of Directors to divest our Canadian subsidiary, ASW Steel, we have recorded ASW as an asset held for sale and as a discontinued operation for financial reporting purposes. Accordingly, we recognized a $15 million impairment charge to record the assets of ASW to our estimated fair value, net of cost to dispose.

首先，依據公司董事會於2018年10月核准之計畫，將我們的加拿大子公司 ASW Steel 進行處分，我們已將 ASW 於財務報導目的下列為「持有待售資產」及「停業單位」。因此，我們認列1,500萬美元減損費用，將 ASW 的資產按估計公允價值（扣除處分成本）入帳。

Second, included in our Q4 and total year 2018 financial results is a charge of $32.9 million, representing the estimated costs for pending and future asbestos litigation, net of additional insurance recoveries through 2052, the anticipated date by which the corporation expects to have resolved all asbestos-related claims. This asbestos charge impacts the reported Air and Liquid Processing segment results. Both the impairment charge and the asbestos charge we recorded are noncash items in the fourth quarter and full year 2018.

第二，我們2018年第四季及全年財務結果中包含3,290萬美元費用，代表對未決及未來石綿訴訟之估計成本，並扣除至2052年（公司預期可於該日期前解決所有石綿相關索賠）可額外取得之保險理賠。此石綿費用影響所報告之空氣與液體處理（Air and Liquid Processing）事業部門結果。我們所認列之減損費用與石綿費用，於2018年第四季及全年皆屬非現金項目。

I will focus my discussion on our Q4 2018 financial results from continuing operations compared to prior year, and I'll refer you to this morning's press release for more commentary on discontinued operations and total year results.

我將把討論重點放在2018年第四季持續營業之財務結果與前一年同期之比較，至於停業單位及全年結果的更多評論，請參閱今早發布的新聞稿。

Ampco's net sales for continuing operations for the fourth quarter of 2018 were $95.8 million. This compares to net sales from continuing operations for the fourth quarter of 2017 of $103.6 million. Net sales in the Forged and Cast Engineered Products segment decreased approximately 8% compared to prior year due to lower volume of shipments of forged engineered products for the oil and gas industry as well as a lower volume of shipments of forged rolls caused, in part, by certain key equipment downtime issues, which carried over from the third quarter.

Ampco 2018年第四季持續營業之淨銷售額為9,580萬美元。相較之下，2017年第四季持續營業之淨銷售額為1億360萬美元。鍛造與鑄造工程產品（Forged and Cast Engineered Products）事業部門之淨銷售額較前一年約下降8%，主因為油氣產業用鍛造工程產品出貨量下降，以及鍛造轧輥出貨量下降；其中部分原因為若干關鍵設備停機問題，且該問題自第三季延續至今。

Net sales for the Air and Liquid Processing segment for the fourth quarter of 2018 were approximately comparable to prior year, and I will comment more on the segment results in a moment.

空氣與液體處理事業部門2018年第四季淨銷售額與前一年大致相當，我稍後將就該部門結果再作說明。

Gross profit as a percentage of net sales was 13.0% for the fourth quarter of 2018 versus 17.9% for the fourth quarter of 2017. The deterioration is principally attributable to the Forged and Cast Engineered Products segment, which experienced lower production levels, offset in part by a higher volume of shipments and improved product pricing.

2018年第四季毛利率（毛利占淨銷售額比率）為13.0%，而2017年第四季為17.9%。毛利率下滑主要歸因於鍛造與鑄造工程產品事業部門生產水準較低，但部分被較高的出貨量與改善的產品定價所抵銷。

Selling, administrative expenses were $14.9 million or 15.6% of net sales for the fourth quarter of 2018 compared to $16.4 million or 15.8% of net sales for the fourth quarter of 2017.

2018年第四季銷售及管理費用為1,490萬美元，占淨銷售額15.6%；相較之下，2017年第四季為1,640萬美元，占淨銷售額15.8%。

Depreciation and amortization expense of $5 million for the fourth quarter of 2018 was comparable to the $5.1 million for the fourth quarter of 2017.

2018年第四季折舊與攤銷費用為500萬美元，與2017年第四季的510萬美元相當。

Loss from continuing operations for the fourth quarter of 2018 was $40.1 million. This compares to a loss from operations in the prior year quarter of $3.3 million. The decline being driven primarily by the $32.9 million charge for asbestos litigation. But I will expand on changes in operating results in my segment-level discussion momentarily.

2018年第四季持續營業之虧損為4,010萬美元。相較之下，前一年同期營業虧損為330萬美元。下滑主要由3,290萬美元石綿訴訟費用所致。不過，我將在稍後按部門層級的討論中進一步說明營運結果的變動。

Other expense net increased for the fourth quarter of 2018 when compared to prior year quarter, due primarily to higher interest expense and foreign exchange transaction losses in the current year versus FX gained in the prior year.

2018年第四季其他費用淨額較前一年同期增加，主要因本年度利息費用較高，以及外匯交易損失（相較前一年為外匯收益）。

The income tax benefit for the current year quarter is driven primarily by the state tax benefit on the asbestos charge taken in the fourth quarter of 2018.

本年度第四季之所得稅利益主要來自於2018年第四季認列石綿費用所帶來的州稅利益。

As a result, the corporation reported a net loss from continuing operations of $41.0 million or $3.28 per common share for the fourth quarter of 2018 compared to a net loss of $4.2 million or $0.34 per common share for the fourth quarter of 2017.

因此，公司2018年第四季持續營業之淨損為4,100萬美元，或每股普通股虧損3.28美元；相較之下，2017年第四季淨損為420萬美元，或每股普通股虧損0.34美元。

The corporation also reported a net loss from discontinued operations, reflecting the operations of ASW of $18.7 million or $1.49 per common share for the fourth quarter of 2018. This compares to net income of $1.2 million or $0.10 per common share for the fourth quarter of 2017. The net loss from discontinued operations for the fourth quarter 2018 includes the $15 million impairment charge I previously described.

公司亦報告停業單位之淨損，反映 ASW 營運結果：2018年第四季為1,870萬美元，或每股普通股虧損1.49美元。相較之下，2017年第四季為淨利120萬美元，或每股普通股盈餘0.10美元。2018年第四季停業單位之淨損包含我先前所述之1,500萬美元減損費用。

Now here's a bit more color on our business segment results. As I mentioned earlier, net sales for the Forged and Cast Engineered Products segment for the fourth quarter 2018 decreased approximately 8% compared to prior year. A lower volume of shipments of forged engineered products for the oil and gas industry and lower shipment volumes of forged rolls caused, in part, by equipment downtime issues were the primary drivers.

接下來補充一些各事業部門結果的細節。如我先前提到，鍛造與鑄造工程產品事業部門2018年第四季淨銷售額較前一年約下降8%。主要驅動因素為油氣產業用鍛造工程產品出貨量較低，以及部分因設備停機問題導致的鍛造轧輥出貨量下降。

The segment's operating income for the fourth quarter 2018 declined versus prior year as a result of lower -- of lower volume of shipments and higher operating costs, including reduced absorption due to lower production levels and higher equipment maintenance costs.

該部門2018年第四季營業利益較前一年下滑，係因出貨量較低及營運成本較高所致，包括因生產水準較低而造成的吸收率下降，以及較高的設備維護成本。

Net sales for Air and Liquid Processing segment were approximately comparable for the fourth quarter of 2018 versus prior year. The segment recorded an operating loss for the quarter ended December 31, 2018, driven by the $32.9 million asbestos charge.

空氣與液體處理事業部門2018年第四季淨銷售額與前一年大致相當。該部門於截至2018年12月31日止之季度錄得營業虧損，主要由3,290萬美元石綿費用所致。

Otherwise, results for this segment were generally comparable to prior year.

除此之外，該部門的結果整體上與前一年大致相當。

Backlog at December 31, 2018, approximated $343 million, an increase of approximately 6% from the $325 million in backlog at December 31, 2017.

截至2018年12月31日，未交貨訂單（backlog）約為3.43億美元，較2017年12月31日的3.25億美元增加約6%。

The backlog increased compared to December 31, 2017, reflects improved demand, particularly for mill rolls, both forged and cast, and higher order intake for each of the product lines within the Air and Liquid Processing segment. Approximately $126 million of this current backlog is expected to ship after 2019.

相較2017年12月31日，未交貨訂單增加反映需求改善，特別是轧機轧輥（包含鍛造與鑄造）需求提升，以及空氣與液體處理事業部門各產品線之接單量增加。目前未交貨訂單中約1.26億美元預期將於2019年之後出貨。

Now I'll review some cash-related items. Please note that this discussion excludes discontinued operations. Accounts receivable at December 31, 2018, decreased by $12 million compared to December 31, 2017, driven principally by lower sales in the current year period, the sale of the Vertical Seal division and by improved collections performance compared to a year ago.

接下來我將檢視一些與現金相關的項目。請注意，本段討論不包含停業單位。截至2018年12月31日，應收帳款較2017年12月31日減少1,200萬美元，主要由本年度期間銷售較低、出售 Vertical Seal 事業部，以及相較一年前收款表現改善所驅動。

Inventories at December 31, 2018, were slightly higher than at December 31, 2017, as higher cast roll, heat exchange coil and custom air handling production activity more than offset reductions in inventory associated with the lower level of frac block production activity in the current year period compared to prior year.

截至2018年12月31日，存貨較2017年12月31日略為增加，因鑄造轧輥、熱交換盤管及客製化空氣處理設備之生產活動增加，足以抵銷本年度期間相較前一年壓裂塊（frac block）生產活動水準較低所帶來的存貨下降。

Accounts payable at December 31, 2018, increased by $3.5 million compared to the December 31, 2017 balance, reflecting a better balance in duration as part of a working capital management effort.

截至2018年12月31日，應付帳款較2017年12月31日餘額增加350萬美元，反映作為營運資金管理努力之一部分，在付款期間結構上取得較佳平衡。

Capital expenditures for the fourth quarter of 2018 were $900,000, and for the full year 2019 -- 2018 rather, were $9.7 million from continuing operations. As Brett had indicated, net of cash flow from operating activities was positive for 2018.

2018年第四季資本支出為90萬美元；而2019年——更正，2018年全年——持續營業之資本支出為970萬美元。如 Brett 所指出，2018年扣除營運活動現金流量後的淨額為正值。

Cash and cash equivalents of continuing operations for the -- of $19.7 million at December 31, 2018, increased slightly compared to the December 31, 2017 balance of $18.7 million.

截至2018年12月31日，持續營運的現金及約當現金為1,970萬美元，較2017年12月31日的1,870萬美元餘額略有增加。

Drawings on the Ampco revolving credit facility were $14.3 million at December 31, 2018, which reflects a decrease compared to the $20.3 million at December 31, 2017.

截至2018年12月31日，Ampco循環信用額度的動用金額為1,430萬美元，較2017年12月31日的2,030萬美元有所下降。

At December 31, 2018, in addition to the cash balance, the corporation also has remaining availability on the revolver of approximately $35 million, which is net of an availability reserve associated with the proceeds from the sale and leaseback financing transaction and the divestiture of our Vertical Seal division in 2018, which is specified for the settlement of the promissory notes and interest due in March 2019. We have, in fact, successfully settled that maturity earlier this month using our revolver, as we had planned.

截至2018年12月31日，除現金餘額外，本公司在循環信貸項下仍有約3,500萬美元的可用額度（已扣除一項可用額度準備金），該準備金與2018年售後回租融資交易及我們於2018年剝離Vertical Seal事業部所取得之款項相關，並被指定用於清償2019年3月到期的本票及應付利息。事實上，我們已如計畫於本月稍早成功以循環信貸提前清償該到期款項。

I will now turn the call back over to Brett for some closing remarks.

我現在把電話交回給Brett作一些結語。

Thanks, Mike. We're making major shifts in the direction of our business. This change in direction involves asset restructuring and consolidation, cost reduction, debt reduction, some basic blocking and tackling. Over the years, we've unintentionally created complexity in our manufacturing processes. Due to simplification of our manufacturing footprint, we'll improve efficiencies in our business and our operations.

謝謝你，Mike。我們正大幅調整公司業務的方向。這項方向調整包含資產重整與整併、成本削減、負債降低，以及一些基本功的落實。多年來，我們在不經意間讓製造流程變得更為複雜。透過簡化我們的製造據點布局，我們將提升業務與營運效率。

This is an exciting time for Ampco-Pittsburgh as we tackle the current challenges and opportunities that are ahead of us. In 2019, we will drive momentum and execution across our businesses to move Ampco-Pittsburgh to a more profitable future. In doing so, we'll remain focused on investing back into the areas of our business that drive bottom line improvements. We've been focused on our actions to address these challenges, and I strongly believe that we are well positioned to deliver on our 2019 priorities.

對Ampco-Pittsburgh而言，這是一個令人振奮的時刻，我們正著手應對眼前的挑戰與機會。在2019年，我們將在各項業務上推動動能並強化執行力，帶領Ampco-Pittsburgh邁向更具獲利性的未來。在此過程中，我們將持續聚焦於回投資於能帶動最終盈餘改善的業務領域。我們一直專注於採取行動以因應這些挑戰，我堅信我們已具備良好定位，能夠落實2019年的優先事項。

I want to thank you for joining us today, and we will now take your questions.

感謝各位今天與會，接下來我們將開始回答各位的提問。

(Operator Instructions) The first question will be from [Robert Strougo] with [RAS Investments].

(接線員指示) 第一個問題來自[RAS Investments]的[Robert Strougo]。

I'm just a little surprised that you're selling your Canadian division. I know you were waiting for something coming from Trump to lift those tariffs. And our stock has really been a horrible performer over the years. Today, we're down to $3.80. We were once $25. And you guys are talking optimistically about the future, maybe -- you don't see mergers in the steel industry, but you've got some substantial assets. And our market cap today is only $48 million for the whole company. I mean, what do you have to say about that? I mean, as far as -- the past has been a horror show. The future doesn't look that bright, except you guys are saying it will be, but the market doesn't seem to believe it today.

我對你們出售加拿大事業部有點意外。我知道你們一直在等川普那邊可能會有動作來取消那些關稅。而且我們的股票多年來表現真的很糟。今天股價跌到3.80美元。我們曾經到過25美元。你們對未來談得很樂觀，也許——你們不認為鋼鐵業會有併購，但你們確實有一些相當可觀的資產。而我們公司目前整體市值只有4,800萬美元。我的意思是，你們對此有什麼要說的？就過去而言——簡直是一場災難。未來看起來也沒那麼光明，除非你們說的會成真，但市場今天似乎不相信。

This is Mike McAuley. Just to kind of respond. I think the way we're looking at this, I mean, we've got a turnaround plan. And while, as Brett described, we're making -- we're announcing some steps in that turnaround plan. And we currently think, as we look at our share price, we're thinking that we're undervalued today. And we -- you're right, we have significant assets. And we have challenges in the industry that we're serving, especially -- particularly the steel industry, as you point out. But as you started off with your question about surprise of selling the ASW division, I mean, we've -- we don't know what the future holds for the trade regulation and where that's going to be going. But we do know that we don't have to be basic in the metal to participate in the forging industry for the products that we're manufacturing today. So this is a strategic move to exit. And I think it's in the company's really best interest to proceed. And so that's the story behind that. Are there any other particular questions you'd like to ask?

我是Mike McAuley。我簡單回應一下。我想我們的看法是，我們有一個扭轉計畫。而且如Brett所描述，我們正在推進——並宣布該扭轉計畫中的一些步驟。以目前股價來看，我們認為公司今天被低估了。而且——你說得對，我們確實擁有重要資產。我們也面臨所服務產業的挑戰，尤其——如你所指出的，特別是鋼鐵產業。但你一開始提到對出售ASW事業部感到意外，我的意思是——我們不知道未來貿易法規會如何發展、會走向何方。但我們確實知道，為了參與我們目前所製造產品的鍛造產業，我們不一定要從事基礎金屬業務。因此，這是一項策略性退出的舉措。我認為就公司整體最佳利益而言，推進此事是合理的。這就是背後的原因。你還有其他特別想問的問題嗎？

Well, I mean, how higher, the stock is $11 for the year, and we were right near -- not too far from the low. The price -- you're selling in a difficult market there in Canada with the outlook being uncertain, so I don't know what kind of price you're getting for that unit. But it seems to me like a bargain basket type of price that somebody may be paying for it now, and I think you might regret it later on. But that's a call for the board.

嗯，我的意思是，股價今年最高到11美元，而我們現在——離低點不遠。你們是在加拿大一個艱困的市場中出售，前景又不確定，所以我不知道你們那個單位能賣到什麼價格。但在我看來，現在可能有人用像撿便宜一樣的價格買走，我覺得你們日後可能會後悔。不過那是董事會要做的決定。

Yes. This is Brett McBrayer. Just a couple of comments. I think it's important to note, as we are looking at our assets and our footprint structure, that it's important that we rightsize our business. And not only to handle the peaks from a demand perspective but also, we know when the market does drop in certain segments, we got to be able to respond positive to that and have the flexibility within our structure to remain profitable in those down periods. If you look at our current structure today, we are not nimble, we're not able to move and respond appropriately. And so this whole process we're going through is simply to rightsize our business and give ourselves the capacity to adjust as needed based on where the market goes. I think the other thing that I noted earlier in my comments was the complexity we've added to our manufacturing process. Now if you go through the flow paths in which we do both for the cast and forged rolls in the engineered product segment, we have made the -- we have created a high-cost structure in a way in which we manufacture. And through some simplification in this process, we're going to see some benefits that are going to improve our ability to respond, not just from a customer perspective, but also from a profit perspective.

是的。我是Brett McBrayer。我補充幾點。我認為重要的是，當我們檢視資產與據點結構時，必須把公司規模調整到合適大小。不僅要能因應需求面的高峰，我們也知道當某些區隔市場下滑時，我們必須能正向回應，並在結構內具備足夠彈性，才能在景氣下行期間仍維持獲利。以我們目前的結構來看，我們不夠靈活，無法適當移動並做出相應反應。因此，我們正在進行的整個流程，目的就是把公司規模調整到合適大小，並讓我們具備依市場走向按需調整的能力。另外一點我在先前評論中也提到，就是我們在製造流程中增加了複雜度。如果你檢視我們在工程產品事業中，鑄造與鍛造轧輥的整體製程路徑，我們在製造方式上——建立了一個高成本結構。透過對此流程做一些簡化，我們將看到一些效益，提升我們的應對能力，不僅是在客戶面，也包括獲利面。

Our next question will be from John Walthausen with Walthausen & Co.

下一個問題來自Walthausen & Co.的John Walthausen。

I think this is probably for you, Brett, because you referred to it several times in your commentary and again in this question about the complexity that has been built into the manufacturing system in the forged and cast roll, et cetera, business. Can you -- I realize, there is a lot of complexity in that. But can you give us an example or 2 of some of the things that you think can be changed advantageously to address that issue? And then talk about the time frame to making these fairly complex changes, as I understand it, that you're contemplating.

我想這題可能是問你，Brett，因為你在評論中多次提到，而且在剛才這個問題中也再次提到，在鍛造與鑄造轧輥等業務的製造系統中累積了複雜性。你能不能——我理解那裡面確實很複雜。但你能否舉一兩個例子，說明你認為有哪些事情可以做出有利的改變，以解決這個問題？另外也請談談你們所構想的這些相當複雜的變革，其推動時程大概會是如何。

Our intention is to progress aggressively through 2019 with a significant portion of these changes. I have to be careful in what I say as, obviously, there's portions of our business that will be impacted by the changes moving forward. But simply through the way in which we move products through our business in a segment, the multiple transportation points in which we go through. And in some cases, the repetition of activities in the process have added cost into our system that are not important or not needed or not necessary, I guess, is the best word to say. Again, I want to be careful about how much I say in response to your question. But there's some simplicity in not only what we do in the facilities, but how we do it between facilities that we can improve on relatively in short order through some of the restructuring that I've mentioned beforehand. And so that has been a focus that we are engaged in. We're also questioning some of the things we have been doing that we believe is really a truly a nonvalue add to our customers. And we want to make sure that we're delivering what they need, but making sure we're doing in a fashion, if you will, that satisfies them without doing extras that, at the end of the day, do not add value to our business.

我們的意圖是在 2019 年積極推進其中相當大一部分的這些變革。我必須謹慎措辭，因為顯然，我們業務中有些部分在未來會受到這些變革的影響。但僅就我們在某一事業部門內讓產品在業務中流轉的方式而言，我們經過了多個運輸節點。而且在某些情況下，流程中活動的重複，已經把一些不重要、或不需要、或不必要的成本加進了我們的系統裡——我想「不必要」是最貼切的說法。再次強調，針對你的問題，我想說多少仍需謹慎。但不僅是在廠內我們做什麼，還有我們在廠與廠之間如何去做，確實存在一些可以簡化之處；透過我先前提到的一些重組，我們能在相對短的時間內加以改善。因此，這一直是我們正在投入的重點。我們也在檢視一些我們一直在做、但我們認為對客戶而言其實真正不具附加價值的事情。我們希望確保交付他們所需要的，同時也要確保我們以一種能讓他們滿意的方式來做，而不是做一些額外的事情——到頭來，這些並不會為我們的業務增加價值。

That's helpful. As I'm visualizing from what you're saying, this is going to involve changes in the workflow, perhaps moving equipment around, things of that nature, so it sounds like fairly disruptive. Should we anticipate that this is going to suppress gross margins through most of this year?

這很有幫助。依你所說我在想像，這將涉及工作流程的變更，可能要移動設備之類的事情，所以聽起來相當具有干擾性。我們是否應預期這會在今年大部分時間壓抑毛利率？

No, John, I don't think so. I think what Brett's talking about here is there's a couple of elements. If you've listened to some of his comments earlier in the call, there's a couple of key pieces here. One is the implementation of a lean-based operating system at a granular level, which will improve production flow paths and increase productivity, ultimately, effectively, increase capacity as well. That's one piece of it. The other thing that he alluded to was restructuring our manufacturing footprint. That can be a little bit more on the disruptive side, but not necessarily depending on the plan of approach on that. That's the part that we're embarking on and that -- we don't have definitive things that we can share today on that. But that's more transformative, and I think those are the 2 key points to address your question.

不，John，我不這麼認為。我想 Brett 在這裡談的是幾個要素。如果你聽了他在電話會議前面的一些評論，這裡有幾個關鍵點。其中之一是在更細緻的層級導入以精實為基礎的營運系統，這將改善生產流程路徑並提升生產力，最終也會有效提升產能。這是其中一部分。他提到的另一件事是重整我們的製造據點布局。這可能在干擾性方面會更高一些，但也不一定，取決於我們採取的推進計畫。這是我們正要著手的部分——目前我們還沒有可以在今天分享的明確事項。但那部分更具轉型性；我認為這兩個重點就能回應你的問題。

And the rate at which you think you can improve responsiveness to clients is -- do we expect to see demonstrable improvement during the year? Or is that more as some of this is accomplished?

那麼，你們認為提升對客戶回應速度的進展幅度是——我們是否預期在今年就能看到可明顯驗證的改善？還是要等到其中一些事項完成之後才會更明顯？

I'm confident we'll see some improvements this year and more to come. Again, we have some very aggressive goals for the team. I believe they're all achievable, and I feel very confident on the path we are at this point in time. So I think you will see improvements as we move throughout 2019. And then I think 2020 and beyond is -- we'll continue to progress in the right direction.

我有信心今年會看到一些改善，而且後續還會有更多。再次強調，我們對團隊設定了非常積極的目標。我相信這些都能達成，而且就目前我們所處的進度而言，我非常有信心。所以我認為你會在 2019 年的推進過程中看到改善。而到了 2020 年及之後——我們會持續朝正確方向前進。

(Operator Instructions) The next question will be from Justin Bergner with G. Research.

(接線員指示) 下一個問題將由 G. Research 的 Justin Bergner 提出。

A couple of questions here. Just to follow up on the ASW question, two parts to it. First of all, so it looks like if I back out the impairment, you're looking sort of on the order of $0.60 to $0.70 of losses for ASW over the course of '18. And I guess, that's sort of a prelude to my second question, which is any sort of update on the timing of that sale process. Obviously, you didn't pay a lot for that asset. And was it sort of the loss of this key customer that changed through the calculus here and pushing you to sell? Or was it mainly the tariffs?

我這裡有幾個問題。先跟進 ASW 的問題，分兩部分。首先，看起來如果我把減損扣除，你們在 2018 年整年 ASW 的虧損大概在每股 0.60 到 0.70 美元的量級。我想這也算是我第二個問題的鋪陳：關於那個出售流程的時程，有沒有任何更新？顯然，你們當初買那項資產並沒有花很多錢。那麼，是不是因為失去這個關鍵客戶，才改變了你們的盤算並促使你們出售？還是主要是關稅的因素？

The -- it's really, I think, threefold. I think it's -- the tariffs are a significant effect because the impact on the business means that the U.S. trade sales, which were a significant piece of its -- of the business have declined significantly. The loss of a key customer didn't help, I mean, we've replaced most of that volume, but -- for different application, so margin's a factor. And then the other part of it is the impact of contraction in this -- in the frac block supply chain reducing internal demand, putting a lower load on the facility is the third element. And I think the perfect storm of combination of all those factors has exposed not only the fact that we've got operating losses and we have uncertainty about what the future holds from a trade standpoint, but it also points out that the volatility in the earnings profile of the business is something that we don't necessarily have to be an owner of the business to still participate in the end market. So that led us to the conclusion that we should be moving in the direction that we're heading.

我認為——這其實是三方面的因素。我想——關稅影響很大，因為對業務的衝擊意味著美國貿易銷售（原本是其業務的重要組成部分）已大幅下滑。失去一個關鍵客戶也沒有幫助；我的意思是，我們已經補回了大部分的量，但——是用在不同的應用上，所以毛利是一個因素。另外一部分是壓裂閥塊（frac block）供應鏈的收縮所帶來的影響，降低了內部需求，使工廠負荷下降，這是第三個要素。我認為這些因素的「完美風暴」組合，不僅暴露出我們有營運虧損、且對於貿易面未來走向存在不確定性，也指出該業務獲利型態的波動性——我們不一定要擁有這項業務，仍然可以參與其終端市場。因此，我們得出結論：我們應該朝目前正在前進的方向推進。

Okay. Got it. And I guess you'll wait to update us on any sort of progress of the sale effort, that's fine. Just on the balance sheet, I just wanted to clarify a couple of things. You mentioned sort of a meaningful change in the accounts receivable, if you could reiterate that. And then this reserve on the revolver, so that was used to pay the promissory notes. You still have the $35 million of unused capacity that you entered 2019 with, is that the correct interpretation?

好的。了解。我想你們會等到有進展再更新出售作業的情況，沒問題。就資產負債表而言，我想釐清幾件事。你提到應收帳款有相當明顯的變化，能否再重申一次？另外，循環信貸（revolver）上的這個保留額度（reserve），是用來支付本票（promissory notes）的。你們在進入 2019 年時仍有 3,500 萬美元的未使用額度，這樣解讀正確嗎？

Yes.

是的。

Okay. Got it. And then the accounts receivable change, how material was that?

好的。了解。那應收帳款的變化有多大？

It was a -- compared to a year ago, accounts receivable were down about $12 million.

相較於一年前，應收帳款大約減少了 1,200 萬美元。

Okay. Can that be sustained? Or is that sort of more of a onetime effort to harvest cash?

好的。這能維持下去嗎？還是這比較像一次性的現金回收動作？

Well, I think -- no, that goes in remaining accounts receivable? No, that goes hand-in-hand with the fact that the Q3 had lower sales than Q4 than a year ago. And that the frac block business is down compared to where it was a year ago. And also, the fact that now we have one of our divisions -- the divestiture of Vertical Seal, it's no longer in the portfolio. So it's working capital that just comes out -- came out.

嗯，我想——不，那是反映在剩餘的應收帳款嗎？不，那與第三季的銷售額低於一年前第四季的事實是相互呼應的。而且壓裂閥塊（frac block）業務相較於一年前也下滑。另外，現在我們有一個事業部——Vertical Seal 的剝離（divestiture），它已不再在投資組合中。所以那部分營運資金就直接退出——已經退出了。

Okay. So it wasn't all cash generation because some of it was just sold?

好的。所以這不全是現金創造，因為其中一部分只是賣掉了？

No, no.

不，不是。

Okay. Got it. And then any sort of idea, given that there was some underinvestment in the assets in the past, what CapEx needs will be in '19?

好的。了解。那麼，鑑於過去對資產有一些投資不足，對於2019年的資本支出（CapEx）需求，有沒有任何想法？

Yes. Well, I think, we talked before, we don't give earnings guidance per se, but we have before talked about our CapEx in relation to a metric like our depreciation expense, which we have been on a maintenance CapEx spending. We've been spending less than our depreciation expense. And while maintenance CapEx is, on a go-forward basis, likely to be a bit below total depreciation expense, we will also have some non -- some revenue-generating or productivity improvement CapEx that should push it up to the depreciation level. So that you can think of it like that for 2019.

是的。嗯，我想我們之前談過，我們本身不提供獲利指引，但我們過去曾談到我們的資本支出與像折舊費用這類指標之間的關係；我們一直是在做維持性資本支出。我們的支出一直低於折舊費用。而在未來，維持性資本支出很可能會略低於總折舊費用，但我們也會有一些非——一些能帶來收入或提升生產力的資本支出，這應該會把它推升到折舊水準。所以你可以用這樣的方式來看2019年。

This is Brett. Just one thing to note and to add to this is that we talked earlier about some of the changes in the complexity of our manufacturing flow path. And through that -- that work is obviously an analysis of the assets we have in our businesses. And where I think you see we -- if you look inside of our businesses, we have invested in multiple pieces of equipment for somewhat similar applications. And we've created flow paths where they can go in multiple directions in our business. And we are keenly focused on declaring, for lack of a better term, the correct flow path for product and the single flow path for product, with, obviously, backups when you run into issues with the product, but instead of looking at the entire list of assets and coming up with one number in terms of what do we need to do on these 3 pieces of an asset, we've been able to narrow it down to fewer assets. It really require the capital that we would traditionally deploy in, I think in a future -- in a past case. So this comment about critically key assets, we've narrowed the scope down to the range on what we need to be successful in the business. And our investments is focused on, I would say, a fewer set of pieces of equipment that are important for us, not just today, but moving forward from a volume expansion as well as give us the flexibility that we need when we see downturns in certain segments.

我是Brett。補充一點需要注意的是，我們先前談到製造流程路徑複雜度的一些變化。而透過那——那項工作顯然是在分析我們各業務所擁有的資產。我認為你會看到——如果你深入看我們的業務，我們針對某些相當類似的用途投資了多台設備。而且我們在業務中建立了流程路徑，使其可以往多個方向流動。我們非常專注於（姑且這麼說）為產品宣告正確的流程路徑，以及產品的單一路徑；當然，在產品遇到問題時會有備援，但我們不再是看整份資產清單，然後用一個數字來概括我們需要對這3項資產做什麼，而是能把範圍縮小到更少的資產。這確實需要的資本，會比我認為在未來——在過去的情況下我們傳統上會投入的要少。所以關於這些關鍵核心資產的評論，我們已把範圍縮小到我們在業務中成功所需的區間。而我們的投資，我會說，是聚焦在較少數、對我們重要的設備上，不僅是現在，也包括未來的產量擴張，同時在某些終端市場出現下行時，給我們所需的彈性。

Okay. Understood. Lastly, the asbestos charge, going out to 2052, when you expect to have all claims resolved, is this a different process versus the every 2-year updating process you were doing before? It seems like it's designed to go out farther in time and sort of what prompted that, if my reading is correct.

好的。明白。最後，石棉費用一路延伸到2052年，也就是你們預期所有索賠都能解決的時間點；這是否與你們之前每兩年更新一次的流程不同？看起來像是刻意把時間拉得更長；如果我理解正確的話，是什麼促使你們這麼做？

Yes. It's exactly right. It's a very good observation. We -- our -- we have a change in estimate for our future projected liability. And based on where we stand from a maturity standpoint as a defendant for this kind of product liability, the availability of improved information, but mostly, the maturity and the experience that we now have under our belt since this first emerged, we now feel that we can project out through the end of the time as far as the asbestos liability life goes. And towards that end, we have changed our estimate for the future liability to change from a moving 10-year horizon, which was our methodology up to this point in the last number of years, to a full horizon look, which should reduce the volatility of any kind of adjustments going forward. And also, expresses to investors clarity on when we think that this issue will be completely behind us. Now I would point out that, especially to -- and you know this very well, but just for other listeners on the call too, we have substantial insurance recovery and which is reflected as part of this. So we're talking about a net change here. So we'd increase the insurance receivable assets on our reported balance sheet and as well as the estimated liability based on taking it out to what we think will be that full-horizon look.

是的。完全正確。這是非常好的觀察。我們——我們對未來預估負債做了估計變更。基於我們作為此類產品責任被告在成熟度方面所處的位置、改良資訊的可得性，但主要是自首次出現以來我們累積的成熟度與經驗，我們現在認為可以把預測延伸到石棉責任生命週期的終點。因此，我們已將未來負債的估計方法，從過去數年一直採用的「滾動式10年期間」改為「全期間」的檢視，這應可降低未來任何調整的波動性。同時，也讓投資人更清楚我們認為這個議題何時會完全成為過去。我也要指出，特別是對——你非常清楚，但也為了電話會議上的其他聽眾，我們有相當可觀的保險追償，且已反映在其中。所以我們談的是淨變動。因此，我們會提高在已申報資產負債表上的保險應收款資產，同時也會基於我們將其延伸到所謂全期間檢視而提高估計負債。

Got it. Does this -- I mean, now that you've done this, do you have any more flexibility in any parts of the business? Or is this just sort of the normal accounting protocol once you have visibility to the total time horizon? I'm just trying to understand if there's anything more significant than an estimation process here as it relates to the business.

了解。那麼——我是說，既然你們已經這麼做了，是否在業務的任何部分有更多彈性？還是這只是當你對整個時間範圍有能見度後的正常會計處理程序？我只是想了解，除了估計流程之外，這件事對業務是否還有更重大的意涵。

I'd be thinking about more of the latter. You know what, I think -- what we do know is that, that there is -- while there is substantial insurance coverage for this, we're very fortunate, in that regard, we have very good coverage. There's still a gap that we're funding on an out-of-pocket basis as a corporation for the gaps in coverage that do exist, but they have been fairly easily manageable over the course of the year -- last several years. And going forward, we expect that the same in the near term kind of level of kind of a cash impact to the corporation, but then we do project that it will decline. We know we're on the downside of the bell curve. And so for the next couple of years, it'll probably be in the same range. And I think going forward from there, looking at the -- the actuarial had provided inputs from our specialists in this regard. We know that we expect it as part of our -- this forward estimate that we expect it to decline and become asymptotic to 0 by 2052.

我會更偏向後者。你知道，我想——我們確實知道，雖然這方面有相當充足的保險保障，我們在這點上很幸運，保障非常好。但仍有一個缺口，我們作為公司需要就現有保障缺口以自付方式負擔，不過在過去幾年——這些年度期間一直都相當容易管理。而展望未來，我們預期短期內對公司的現金影響大致會維持在相近水準，但之後我們預估會下降。我們知道我們已處於鐘形曲線的下行階段。因此接下來幾年可能會落在相同區間。我認為再往後，根據——精算師在這方面由我們的專家提供的輸入，我們知道，作為這項前瞻估計的一部分，我們預期它會下降，並在2052年前後漸近於0。

Okay, that's helpful. And just remind me sort of what the annual cash outlay is?

好的，這很有幫助。那再提醒我一下，每年的現金支出大概是多少？

It has been fluctuating in a range of $4 million to $7 million kind of a thing over the last couple of years, including this year.

在過去幾年（包括今年）一直在4百萬到7百萬美元的區間內波動。

Ladies and gentlemen, this concludes our question-and-answer session. Thank you for -- and this concludes today's call. Thank you for attending Ampco-Pittsburgh Corporation's Fourth Quarter 2018 Earnings Conference Call. You may now disconnect your lines.

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